I heard an advertisement on Radio by RBI (yes - Reserve Bank of India) - and for once this was not the "RBI kehta hai" ads cautioning us against scamsters. This was promoting RBI Retail Direct as a means for common people to directly purchase and sell government bonds with the promise of no brokerage.
I had enrolled onto RBI Retail Direct sometime last year out of sheer curiosity. Here is a review based on that experience...
What can we buy? The portal allows me to buy Treasury Bills, Central Government Securities and SDLs or State Development Loans directly from the RBI. I also see Sovereign Gold Bonds and PSU bonds like Oil India's bonds there as well, though they are very few of those.
Enrolment process: Is fairly straight-forward and painless on https://rbiretaildirect.in/ ; You open what is called an Retail Direct Gilt account via that process. The enrolment is smooth with e-kyc and bank account verification all done online. I did the enrolment process at 11PM on a wednesday night, and received an email with credentials by noon of thursday.
The retail portal Once I got access to the retail portal, I realized quickly I could only use that portal for subscribing to primary Issues. I could not sell anything pre-maturely. So What I had to do was apply to access to the secondary market platform (NDS OM which stands for "Negotiated Dealing System -Open Market) via the retail portal after logging in. That was a single click application, which again I got access to within 24 hours.
Transacting on retail/secondary portals It is not fancy/jazzy, but has some interesting features. The bidding on the primary sales is straightforward - as a retail investor, you do not get to bid for the expected interest rates (yield, if you want to be specific). You are allocated based on the results of what the institutional investors get. You can see your portfolio on the retail portal as well as the secondary portal. Interest on any security, as well as redemption proceeds got auto credited within 24 hours.
The NDS-OM portal or the secondary portal again is not fancy or designed with extreme ease of usage. That said, I still preferred it to all other brokerage sites offering government securities. Why? Because it gives you very transparent pricing. I say this because in other sites, when I make an offer of INR "X" for a government security in the secondary market, I have to calculate myself what the accrued interest is, how much will be the Yield to maturity etc. In RBI's NDS-OM portal, the portal provides all this data once you input the price you want to offer. It also pops-up several warnings to ensure you understand what exactly you are bidding for.
Pragmatic pros and cons:
A "blah" Pro: All brokerages can charge upto 0.06% on primary issues, and they do. RBI Retail Direct has zero brokerage. What does this mean? I transacted on Zerodha's Coin for the 91,182 and 364-day treasury bill in Early November 2022 for for a redemption value (face value) of 10,000/-. Using the RBI direct site gave me savings of upto INR 2.20/- per INR10K . Absolutely nothing to write home about.
A con for all platforms: You cannot port investments from your demat account to the RBI Direct Gilt Account and vice-versa.
NDS-OM seems to be a separate market from NSE/BSE, so you may get some bonds which are not available in the two exchanges. But NDS-OM has sparse volumes for a retail investor.
The biggest pro according to me is the transparency of data in the NDS-OM website.
Another pro - you have the ability to create different watchlists and see how they are faring every day. I have one created by year of maturity and I can see the Yield to maturity across securities maturing in that year.
Big con: The NDS-OM website cannot be logged-in when the market is closed! Also, my account got locked due to non usage, and I had to write to RBI to unlock it.
Reasonable Pro: The RBI folks are quite responsive for queries and help. They even responded to my queries on capital gains on gold bonds:)
My verdict:
Go for it only if you have intellectual curiosity, or you want to invest in securities and forget about it! I actually want to park funds there which I want to hold to maturity
With the long term capital gain tax going away in debt mutual funds, maybe more retail investors will get into direct G-sec investing, which in turn may increase liquidity. I do doubt if this will make a material difference though
The pricing on NDS-OM is more rational that what I see in NSE. People bid crazy prices on NSE/BSE in the hope that some investor may place a market based order and they can take advantage. Chances of finding deals are higher on NSE/BSE rather than NDS-OM where sellers are usually institutional
It is one more platform to track, so if you want to invest directly, I would just go with my existing broker. Almost all of the brokers offer these on their platforms.